Kerala is hardening stance on cement



As builders elsewhere team up to explore opportunities of setting up a cement plant to tackle rising costs, Kerala builders are looking at the option of opening up dealerships.

The build-up of ire against repeated hikes in cement price by manufacturers found concrete expression last week when the Builders Association of India (BAI) declared that it would proceed to put up its own cement plants.

An apex body of engineering and construction contractors, the BAI is initially looking at least one of four strategically located and captive plants of an annual capacity of five million tonnes going on stream in the next three years. Mineral-rich Andhra Pradesh, Rajasthan, Gujarat and Chhattisgarh presented themselves as immediate choices for locations, according to BAI.

Last year, the BAI had approached the Competition Commission of India (CCI) seeking to restrain the Cement Manufacturers Association of India (CMA) from hiking prices by ‘artificially creating shortages' at the market place. Though the State is resource poor and industrially backward, the State backed by wads of expatriate currency has a thriving construction and building sector with its own identity.

Mr S. Raghuchandran Nair, Secretary-General of the State Chapter of the Confederation of Real Estate Developers Association of India (Credai), recalled that cement manufacturers have been crying themselves hoarse over ‘imaginary losses' in business.

The losses they are referring to, if at all, were those made on profit and not on their business, he argues. This is what has prompted Kerala-based builders to take action, he told Business Line. The State has hardly any land left to build new industry, much less cement plants; it was therefore left to the builders to come up with what they described as the next best alternative - pool available resources together and set up own cement dealerships. Thus, if the BAI could think of setting up cement plants, its Kerala fraternity was ready with a blueprint for acquiring dealerships.

‘PROPOSAL STAGE'

Mr R. Rajesh, Chairman of the Thiruvananthapuram Centre of the BAI, however, said that the dealerships are still at a ‘proposal stage.' The plan is to contract purchases in bulk from small-scale manufacturers and make available cement at reduced prices.

The builders' community is looking for a price tag of Rs 280 per bag against market prices of Rs 320 and above, and this looks quite feasible.

Already, a number of builders have resorted to imports from Pakistan through the Cochin port, whose landed prices in region of Rs 280 per bag is quite reasonable for the clientele based in Kochi and the neighbourhood. One major hindrance for going for imports in this manner was the mandatory ISI benchmarking of the stock.

Mr Rajesh said this has been solved with a couple of Pakistan-based manufacturers regularly supplying to the Kochi-based customers managing to win the ISI standard.



‘PAK ADVANTAGE'



But, unfortunately, for builders located in Thiruvananthapuram and elsewhere in the State, this has not proved much of a relief since the haulage from Kochi would shave off Rs 30 to 40 from the margin, almostr nullifying the ‘Pak advantage'.

Thiruvananthapuram used to have a railway siding for cement in its backyard. But is has since been shut down, and the nearest railway facility is Kollam, which is over an hour's drive from here. This has forced the builders situated outside Kochi to look for other options, Mr Rajesh said.

Mr Nair said that there are many small-scale cement manufacturers, especially those based in Andhra Pradesh, willing to reach supplies to the project site at bargain prices. Quite a number of players have come forward to support the proposal for establishing dealerships, which would make available a ready pipeline of adequate supplies.

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